You may have heard of the Dunning Kruger Effect, and if you think you know everything about it, you are probably wrong. This was the essential finding of a now often misunderstood study by David Dunning and Justin Kruger in 1999; People who are the least competent in a given field are the most likely to overestimate their ability.
This can lead to some mildly humorous statistics, like the fact that 88% of people think they are ‘above average’ drivers. You don’t need to be an expert in statistics to see the funny side. To quote David Dunning himself, “we are all confident idiots.” We are all guilty of this bias; everyone one of us has pockets of incompetence that we do not recognise.
So what is the solution? Feedback from others has been shown to help and continued learning is a must as always, but ultimately, the only solution to is to be an expert in your given field. The only way to truly know how good you are at something, is to know so much that you have uncovered exactly what you don’t know. This is called being an expert. There are no shortcuts, no way to pay your way into the club; only through rigorous education, hard work and experience can you get to the point where you genuinely know your stuff.
This cognitive bias can be especially damaging in the world of Real Estate. The reason this is particularly damaging to clients represented by someone inexperienced is that when negotiating a sale price, it could cost you hundreds of thousands of dollars or your dream home. Real Estate Agents spend their time going around telling people just how good they are at their jobs, what a perfect recipe for consistently overestimating your ability. Although the Dunning-Kruger effect doesn’t necessarily relate to the ego, the people who overestimate their ability just simply don’t know their blind spots. It is the illusion of superiority. They don’t have what the experts call ‘Metacognition,’ that is, the awareness of one’s own thought processes.
This metacognition is extremely important in a negotiation, as a great negotiator needs to have the ability to be aware of their own thought processes, as well as those of the person they are negotiating with. You need to be able to think carefully while communicating intelligently, a hard task for an amateur. One of the issues with the incentives inherent in Real Estate is that agents and advocates pick their own fees. These fees are negotiated directly with the client, usually, someone who doesn’t do this for a living. Buyers Advocates, for example, who don’t have the requisite skillset or experience, often charge a lower fee. This seems attractive to their potential clients, but what is missed entirely is what the Advocate doesn’t know – their blind spots. It could be weeks or potentially months before a serious negotiation begins for the client's dream home, but the agent isn’t able to perform under pressure. The client loves the property so much they are happy to pay what they have to, but the agent hasn’t saved them any money on the purchase, nor have they considered the right terms to secure the best deal possible. That slight saving in fees at the beginning has cost the client dearly in the end. Interestingly, some people may not even know ‘what could have been’ because the Buyers Advocate wasn’t aware of the damage they were doing, and the client, not being an expert, had no reason to doubt their approach.
“If you think hiring a professional is expensive, try hiring an amateur”
The biggest risk isn’t finding someone to represent you that is a really bad person who doesn’t have your best interests at heart. It is far more likely that you come across plenty of great people, but only few of them know what they are doing, to the point where they know what they lack. The one thing a person cannot do, however brilliant they are, is write up a list of things that would never occur to them. Ironically, experts in any given field actually know what they don’t know. So, when you are hiring a professional to act on your behalf, make sure they know their stuff, but not so much that they know it all. Ensure they have a thirst for knowledge and the essential experience required to protect your position. Find someone who not only can protect you from cognitive biases like the Dunning-Kruger Effect but who can also use them against their opponents in negotiating to your benefit. An intelligent decision to select someone you trust who is an expert in their field will be worth every penny.